The CFPB’s proposed revisions to its “Policy to Encourage Trial Disclosure Programs” (TDP Policy) have been strongly criticized by consumer and public interest groups who, in addition to other objections, assert that the proposal exceeds the Bureau’s authority under Section 1032(e) of the Dodd-Frank Act.
Section 1032(e)(1) provides:
The Bureau may permit a covered person to conduct a trial program that is limited in time and scope, subject to specified standards and procedures, for the purpose of providing trial disclosures to consumers that are designed to improve upon any model form issued [by the CFPB pursuant to its authority to prescribe disclosure rules under Section 1032 and issue related model forms], or any other model form issued to implement an enumerated statute, as applicable.
A comment letter submitted by the National Consumer Law Center joined by 10 other consumer and public interest groups raises the following principal objections to the CFPB’s proposal:
- The Bureau’s trial disclosure program authority is limited by Section 1032(e)(1) to the improvement of model forms. The commenters reject the CFPB’s claim that under Section 1032(e)(2), it has the authority to waive a requirement of a rule or enumerated consumer law. (Section 1032(e)(2) provides that “a covered person conducting a trial disclosure program shall be deemed to be in compliance with, or may be exempted from, a requirement of a rule or an enumerated consumer law.”) According to the commenters, Section 1032 “does not authorize the Bureau to allow trial disclosure programs that change or eliminate the substantive information required to be disclosed, or to deviate from any other substantive requirements of the statute.” They contend that the CFPB only has authority to revise substantive disclosure requirements to the extent provided in the enumerated consumer laws themselves and that such authority would require the CFPB to use APA notice and comment procedures. According to the commenters, “if the Bureau wishes to experiment with more substantive changes to disclosure requirements before proposing a rule amendment, it may do so through consumer testing or focus groups that do not involve real consumers risking real money.” Notably, the commenters challenge the Bureau’s “mistaken and illegal characterization of a trial disclosure program as one that is used to allow a ‘participant’ to obtain access to market in exchange for ‘reduced regulatory barriers.’” They state: “It is not the purpose of [the trial disclosure program] to ease access by new players in the consumer financial product marketplace. The purpose of the statute is to protect consumers and improve existing model forms to promote consumer understanding.” (emphasis included).
- The CFPB’s authority to allow a “covered person” to conduct a trial disclosure program does not allow it to grant waivers sought by trade associations pursuant to a blanket application for its members.
- The proposal does not comply with the requirement in Section 1032(e)(1) that a trial program be “limited in time” because it would allow an unlimited number of two-year extensions beyond the initial two-year period of a waiver and, if the Bureau was engaged in rulemaking, could allow longer extensions of unlimited duration. The commenters also criticize the Bureau for relying on companies to notify it of material changes that should be investigated and not including any requirements for Bureau monitoring.
- The proposal does not comply with the requirement in Section 1032(e)(1) that a trial program also be “limited in…scope” because it “imposes no limits in the number of consumers who may be exposed to the trial or the range of products and services.”
The public interest groups submitting the comment letter were also among a much larger group of signatories to a letter sent to the CFPB by “consumer, civil rights, legal services, labor and community groups writ[ing] in strong opposition to [the CFPB’s] policy to encourage trial disclosure programs.” The groups’ objections set forth in the letter track those set forth in the comment letter.
For a discussion of the CFPB’s proposed amendments to its trial disclosure program policy, click here to listen to our recent podcast.